- Chris Williamson, Chief Economist at survey compilers Markit
Service sector activity in the UK expanded at a faster than projected pace in the tenth month of the year, spreading optimism over the state of the economy and supporting the case for an interest rate increase. The seasonally adjusted Markit/CIPS services Purchasing Managers' Index (PMI), a gauge measuring the performance of the services sector that accounts for 78% of the country's total economy, rose for the first time since June 2015 to 54.9 from 53.3 in September, as reported by market research group Markit. The actual figure outperformed market expectations of 54.5. A reading above the threshold of 50.0 implies expansion, while one below 50.0 hints at a contraction in the sector.
In spite of the improvement, the growth rate in October was still the second-weakest since May 2013. New business expansion did not succeed in accelerating from a 29-month low in September. In addition to that, the 12-month activity outlook was the weakest in two-and-a-half years. Input price inflation slowed down for the fourth time in the last five months, while charges levied by service providers climbed up only marginally. Earlier in the week, the UK construction PMI was released at 58.8, completely in line with market forecasts, while Monday's manufacturing PMI surpassed analysts' projections with 55.5 points.
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